Regarding pay - you are paid your contracted billeted rate. You still still make that; however, there is a GOI tax. That "new" tax is a payroll withholding, so if you were filing a 673 there is a fairly sizable tax withholding. If you weren't filing 673 and already had US Fed tax withholdings it's basically offset depending on your individual deductions.

I was under the impression that the GOI tax was countrywide, but I have not spoken to anyone with Dyn, TC, or SOC. As it was explained to me/us was that USG employees were exempt for the GOI tax, but all NON-USG Employees (contractors) pay the GOI tax.

I am in Basra and this is what I have been told to me from my bosses. It hasn't been taken out of my paycheck yet and I am not high enough on the food chain to have any idea on where this is coming from.

So you have been told you are having taxes taken out, but you have yet to see taxes taken out? I'm still calling shenanigans.

There was recently a meeting in Baghdad, where the GOI discussed/briefed the tax issue with many security companies. However, nothing has moved forward from that initial meeting, especially with reportedly regard to WPS. Since then, there have been rumors flying regarding WPS contractors being taxed, who was being taxed, how much they are taxed, etc...

Will it happen? Maybe. Is it happening? Show me a WPS LES/Pay Stub that has Iraqi taxes taken out and you'll have something more to go on. Until then, I'm not buying it.

Personnel from other Task Orders have yet to chime in here and say they are being taxed and I know on at least two, that they are not. Plus with the way people vent on SocNet, I imagine the second GOI takes taxes out of some PSD dude/Guards pay check, this room will go nuts.

To date no one other than people who say they heard it from somewhere/someone, and now you saying you've heard it, but haven't seen it are making any claims. No offense, but I'm still tossing the bullshit flag.

With regard to non-WPS/USG hired personnel, they may very well be getting taxed. But then, this conversation was about the Basrah WPS contract. Now, Global personnel in Basrah, who are not on the WPS program may be getting taxed and that may be misconstrued by some to mean you all are getting taxed. That however, is not currently the case.

Apologies, typed too fast. Should read: In fact paying a higher tax rate to cover back taxes for 2013.

GOI tax withholding didn't start till April, so the withholding is at a higher adjusted rate to make up for the Jan - Mar (2013) period.

So we have one person from Basrah WPS who says he was told he is paying taxes, but has yet to see any taxes taken from his pay.

Now another is stating Basrah WPS personnel are paying an increased tax rate to make up for back taxes to the GOI.

The one person has not had money taken out for taxes and another is stating people are paying extra! Yeah, again, I'm calling BS. The stories don't add-up.

Let's get this straight, until someone offers up proof that taxes are being taken out, this talk is all rumor and speculation. Proof is not that you heard it from someone up the food chain, or someone told me there was this tax thing. Proof is an LES/pay-stub that shows exactly how much you are paying in taxes to the GOI.

USMC2PD, are you currently on the ground in Basrah, working in a CLIN'd WPS position? Do you have an LES/pay-stub that states you are paying taxes to the GOI?

I have no problem being proven wrong. Please do. However, until someone produces hard proof of taxes being taken out, knock off the speculation and passing on of IHeardItFromABudNet information.

Here is what we recently got from our HR department. My company is a sub to both Global and SOC in Baghdad and Basra.

"Dear Employee,

The US- Iraq Status of Forces Agreement (SOFA) ended in 2011 and was not able to be renewed by the US and Iraq. As you may know or may not know, that agreement protected our employees from the requirement to pay income tax in Iraq on income earned as a result of work on US contracts.

We have recently learned that, as a result of the non-renewal of SOFA, company employees are no longer exempt from Iraq tax liability while working in Iraq. While this is a new development, please be assured that we are exploring every avenue to mitigate the impact of the tax burden.

We will keep you informed as we work through this issue, and will provide you with additional details as they become available.

Thank you,

XXXXXXXXXXXXXX
Director of Human Resources"

This has been the only "Official" information we have been provided to date. Our on ground management, both sub and prime, are saying things are being worked out at the top levels of corporate and it will take some time before anything is decided upon. There has been no changes in our pay to date. Doesnt mean it wont happen, or that it hasnt already happened to others, but for us it hasnt happened yet. It should be noted however we are non-pss positions...

Thanks for the heads up. Seems strange that you are taxed while others on your contract and elsewhere in Iraq are reporting differently. Hopefully someone looks into that for you.

It definitely is strange about getting two different stories from two different personnel on the same contract, but it doesn't surprise me to see people on different contracts saying different things. The Iraqi government is not the model of efficiency or thoroughness, and since taxation is a company-level issue, not so much a DoS issue, I could see each company trying to mitigate this in their own ways and at their own pace.

If you find yourself in this situation you should ask your company for a copy of their "Hypothetical Tax Withholding Policy", or if they have a policy. If they are talking out money to pay a foreign govt. you can bet it is very likely being put into a escrow of sorts, and managed by the company. This is common. You definitely need a "real" CPA if you're in this situation, you could be in a situation where you under/or overpay your company. You'll also would be eligible for a foreign tax deduction, lowering your US tax amount. This shit is a nightmare....

My people in Basra are not paying taxes, although there are rumors out there about it..Iraq-wide. We went to the GOI tax meeting in April and there was no information put out in a definitive way.

ok.. on TO6, Iraqi taxes being taken out of my pay,,,,talked to my tax professional, says it will be a wash due to the foreign income tax credit. Ive seen it for the past several pays, and very little difference. I do NOT claim to be the expert, just telling you my deal....FWIW

...but based on my interpretation of what I just read on IRS.gov I believe that these Iraqi taxes are a direct 1 for 1 offset with US taxes UNLESS you are also claiming the Foreign Earned Income Exclusion (e.g. 330 days out of country) in which case you can not claim the foreign tax credit for that 98,000ish of tax-free income.

Previously, using the '330-physical presence test' would have saved you approximately $30,000 in taxes depending on your state whereas now it will be closer to $15,000 because of this GOI imposed tax.

This is what was passed to TO5 as far as tax rates
KRG (Northern Iraq) = 5% of 65% of your gross pay
Central & Southern Iraq = 15% of 65% of your gross pay

◦The Iraqi tax will be offset (credited) against your US federal withholding.
◦If your US federal withholding is at least 15% of 65% of your gross pay, then you will see no change in your net paycheck.
◦If your federal withholding is not enough to cover the Iraqi taxes, then your net pay will be reduced.
◾You will have the ability to get this money back in credit against future taxes owed on your annual returns.

I'm assuming that's sarcasm...being a "certified professional" simply demonstrates at least a certain level of proficiency, not that you're always more informed or better at something than everyone else. I would venture my research over the years into the accounting issues that face contractors has given me a greater body of knowledge than the vast majority of accountants who rarely deal with the issues facing us.

In any case - the IRS's own website offers everything we need and you can interpret it however you'd like.

Go ask the guys who are losing audits for incorrectly claiming the Foreign earned income exclusion (FEIE) under the Bonafide Residence test what their "certified professionals" were worth to them.

http://www.irs.gov/pub/irs-pdf/p514.pdf
IRS: "You cannot take a credit or a deduc­tion for foreign taxes paid on income you exclude under the foreign earned
income exclusion or the foreign housing exclu­sion."

My take (or read the publication and come up with your own)
1) Individuals who don't claim the FEIE should get a dollar for dollar credit and the new Iraqi taxes will be a wash since the tax rate is lower than the US rate. (exactly as the companies are claiming)
2) Individuals who do claim the FEIE are getting a kick to the nuts and losing "15% of 65%" of the 98000ish that's excludable under the FEIE -- e.g. nearly $10k annually. (something the companies are conveniently leaving out)

Some other things to note;
- Once you've made over $98000 and are paying US taxes the Iraqi tax will be offset again so for those guys who aren't paying back-taxes this year and are claiming the FEIE the actual effect of the Iraqi taxes should be much lower for 2013 since many of us are already almost to that 98k thresh-hold. Maybe instead of losing "15% of 65% of 98000" we'll lose "15% of 65%" of the current gap between what we've already made prior to the Iraq tax implementation and 98000. (I'm talking about the result when taxes are actually settled at the end of the year and credits have been issued with refunds applied...etc)

- Now that we're paying Iraqi taxes we aren't automatically disqualified from the Bonafide residence test as was detailed in IRS memorandom AM2009003. Claiming this went from 'black' to 'gray' as you'll see if you take the time to read it. Guys who weren't claiming the FEIE under the bonafide residence test before and go home for every vacation might even be encouraged to attempt it now although it still seems "iffy." Someone like LukeFairfield who regularly deals with audits and auditors will hopefully provide their thoughts on this...

This is correct...At least as far as we have been told. This is what TC told their staff and they will start automatically deducting these amounts from our paychecks starting July 7th.

My question to my tax professional and this may seen naive, is how can an American be expected to pay taxes in 2 countries. If you pay taxes in a foreign country, does that not make you a resident/taxpayer/producer in that country? Im certain this has been addressed (at least I hope it has) however I haven't been able to find the IRS subject on this so Im waiting for further answers.

Quote:

Originally Posted by jpworthingham

This is what was passed to TO5 as far as tax rates
KRG (Northern Iraq) = 5% of 65% of your gross pay
Central & Southern Iraq = 15% of 65% of your gross pay

◦The Iraqi tax will be offset (credited) against your US federal withholding.
◦If your US federal withholding is at least 15% of 65% of your gross pay, then you will see no change in your net paycheck.
◦If your federal withholding is not enough to cover the Iraqi taxes, then your net pay will be reduced.
◾You will have the ability to get this money back in credit against future taxes owed on your annual returns.